Bitcoin Self-Custody Complicates Cost-Basis Tracking for 2026 Tax Filings

WHY IT MATTERS

Think of cost basis like a receipt for something you bought. If you buy a collectible at a store for $100 and later sell it for $150, you owe taxes on the $50 profit. But if you lose the receipt, you might not be able to prove what you originally paid, which could mean the tax authority assumes you paid $0 and taxes you on the full $150. In crypto, when you move your Bitcoin off an exchange into your own personal wallet — called self-custody — it is like taking your collectible out of the store's tracking system. The store no longer keeps your receipt for you. If you sell later, you need to dig up your own records of what you paid. For people new to crypto, this is an important reminder that managing your own wallet comes with responsibilities beyond just security — it also means keeping careful records for tax purposes.